Q: The market demand and supply curves for an agricultural product are as follows:
Qd = 4500-250P and Qs = 200p
where quantities are in thousands of bushels per annum and price is in dollars per bushel.
the government wishes to acheive a higher point on the supply curve than the initial equilibrium. the desired point would involve both price and quantity being 10% greater that their initial equlibrium levels. the government is considerting either a subsidary or support price.
a) if the subsidary were used, how much would the subsidery per bushel have to be ? what would be the total cost on the government arising from this subsidary?--done this by getting equlibirum where p = 9.2 so subsidy is 11-9.2 = 1.8 and total cos to gov is 3960
regarding the answer to a, could u plesae explain to me why the equilibrium price for this calculation is not 10 and if not how did u get 9.2
many thanks
To explain why the equilibrium price is not 10, let's first understand the concept of equilibrium. In economics, equilibrium refers to the price and quantity at which the demand and supply curves intersect. At this point, the quantity demanded by buyers is equal to the quantity supplied by sellers.
In the given scenario, the demand curve (Qd) is represented by the equation Qd = 4500 - 250P and the supply curve (Qs) is represented by Qs = 200P. To find the equilibrium price, we need to set the quantity demanded equal to the quantity supplied and solve for the price.
Qd = Qs
4500 - 250P = 200P
To solve this equation, let's isolate the P term:
4500 = 450P
P = 4500/450
P = 10
Based on this calculation, the equilibrium price is indeed 10. Therefore, it seems there might be an error in the calculation you mentioned (obtaining 9.2 as the equilibrium price).
If you provide more information about the steps you followed to arrive at 9.2, I can help identify where the discrepancy might have occurred.